For those of you with V.A. eligibility, let me say thank you. There is no way to get V.A. eligibility without serving our country, and for that I am grateful to you! If you have that eligibility you are fortunate indeed. I came across a situation the other day that highlighted the benefit of a V.A. loan that I think everyone should hear.
“Gerald” called the other day. He makes a lot of money, near $12,000 a month with his military retirement income, and his current defense contractor income. However, his credit score isn’t very good. In fact, it’s about 635, well below the national average.
If Gerald wanted to buy a home using “conventional” financing he would have to put at least 20% down because no mortgage insurance company would approve him for mortgage insurance with his credit score. And in addition because of the Loan Level Price Adjustments associated with conventional financing his interest rate would be nearly 5.625% for a 30 year fixed rate. Ah, but Gerald has V.A. eligibility!!
Gerald can buy the same house with absolutely no down payment, and no mortgage insurance. Even his V.A. “Funding Fee” is waived because he has a slight service connected disability. And his interest rate is only about 5.125% on a V.A. loan!
So let’s review his situation: $400,000 purchase price.
Conventional: $80,000 down payment, 5.625% and a principal and interest payment of $1,842 -or-
V.A.: $0 down, 5.125% and a principal and interest payment of $2,177. That’s just over $200 more per month to finance $80,000 more! Gerald, aren’t you glad you earned your V.A. eligibility?
For more on V.A. underwriting and my ideas to fix lending see my post entitled: “Mortgage Solutions using V.A. lending as our guide” by clicking here.